The Sub-Wonderful Jobs Report

The unemployment rate dropped below 9% in the latest report, to 8.6%. This is not without significance. Eight point anything looks a lot better than nine point something else. The economy added 120,000 jobs, which is nothing to sneeze at. To see a valiant attempt to squeeze every last bit of political juice out of that for the Administration, see Stephen Gandel's piece at Time/CNN.

Just when we were expecting the economy to go boom it went zoom. The unemployment rate in November dropped faster than it has in more than 11 years. You have to go back to September 2000 to get a quicker decline.

Gandel argues that the numbers are really better than that, perhaps as good as 300,000 more persons employed. He asks, hopefully, whether this might be a game changer.

Unfortunately, there are a lot of asterisks after that "zoom". The most talked about qualification is that the drop in the unemployment rate owes more to people giving up looking for jobs than it does to job creation. The report includes 315,000 people who stopped looking for work. That's more than twice the number of jobs created, enough to eat up the speculative gains that Gandel argues for and then some.

Bill Galston, a Brookings guru and one of the genuinely independent thinkers on the liberal side of the ledger, points out how depressing the zoom really is. At The New Republic:

First: Despite the growth of the working-age population over the past four years, the labor force (roughly, the sum of those employed plus job-seekers) has not expanded. For various reasons, more and more Americans have been dropping out of the labor force…

Second: Despite the modest economic recovery since the recession ended in mid-2009, total employment remains more than 5.5 million below the level of 2007 and about 1.6 million below where it was when President Obama took office.

Third: To regain full employment (5 percent, which happens to be the same as the level when the recession began) with the pre-recessionary labor force participation rate, we would need 150.7 million jobs—10.1 million more than we have today. That's a reasonable measure of the hole we're still in, two and a half years since the official end of the recession.

As John Hinderaker puts it at Powerline:

This means that labor force participation is down to 64 percent, almost two percent lower than when President Obama took office and the lowest figure in nearly 30 years.

Does President Obama have to take the blame for this? Politically speaking, yes. Taking the blame is one of the constitutional duties of a President. In terms of causation, of course not. Most of the recent job loss came before Obama took office. Events outside the U.S. and beyond the President's control are no doubt a real factor. If you are inclined to shift the blame, be my guest.

We are in fact in a deep hole, as Galston says. At the present rate of job creation, it will take more than twenty five years to get back to pre-recession employment rates, and that is assuming that the present rates continue.

The question, as always, is what to do about it. Paul Krugman knows! To save Europe, the northern countries have to spend like they were Greeks. To save America, Washington has to do the same.

Okay, but that is what we have been doing: injecting trillions of dollars of stimulus spending into the economy since before Obama took the oath. Maybe, just maybe, it isn't working and we are only delaying the recovery. Maybe businesses aren't investing because they know that any increase in the productive output of the economy will be soaked up by the deficit spending without denting the public debt. Perhaps they aren't hiring because they have no faith in a government that can't pass a damned budget, let alone deal with the long range fiscal problems facing the country.

The real problem underlying the European crisis and our own is a general loss of confidence in government. Until and unless that is restored, nobody's jobs bill is likely to work.

Comments

[Kody]

Dr. Blanchard, great blog. I find myself asking if we as Americans are doing this to ourselves. Although Obama is there to "politically" take the blame, we need to be able to look at ourselves and what we are doing to help the situation.

[Ken Blanchard]

Kody: good question. It's always us. Obama just works here.

[Donald Pay]

My work involves finding jobs for people with disabilities, so I know a bit about the job market. Immigration has an impact on the people seeking work. With a crack down on immigration going on, fewer people are in the job market. Second, more people have entered college and technical schools rather than the job market. Third, a continued trend of males losing manufacturing and construction jobs over the winter. This year there was more hesitation in holiday hiring, which could have discouraged people.

[Dave]

I just can't help but wonder... What would things be like if Grumpy McCain had won...

[tedp]

Dave,
My guess is that things wouldn't be a whole lot better if Grumpy McCain had won. Things would be better, but not great. Kody has hit the nail on the head. The problem is with us (voters, the public). Everyone loves a free lunch and until a majority of voters admit that government has promised us too much, and some programs that benefit us have to go, we will continue to trip down the path toward disaster.

The 20th century saw an incredible explosion in government spending (both in real terms and as a per cent of GDP) around the world. Great improvements in quality of life came with this spending but the simple fact remains that it is not sustainable. Neither continued borrowing nor increased taxes can sustain it. Government and its accompanying benefits to citizens must be reduced.

Someone from the statist side of the argument please tell me how government spending cannot help but crowd out private spending. Greece, Spain, Italy etc. are not in crisis due to a lack of government activism or spending.

Bring on the election and let's see if we have learned anything. My guess is we haven't experienced enough pain--yet.

[larry kurtz]

Which earth hater can deliver anything other than the stability offered a second Obama term, Ted? Looks like a Dem has the North Dakota Senate race already wired in:

http://www.rollcall.com/issues/57_67/north_dakota_senate_race_isnt_tossup_rick_berg_heidi_heitkamp-210674-1.html?pos=opolh

Montana is poised to become a blue state. Could ND help re-elect the President?

[Dave]

Interesting juxtaposition with the cartoon...

American Airlines would have been gone long ago had they:

been making multiple daily flights to places NOBODY wanted to go. (Like Iraq in 2003)

slashed their 1st class fares with no intention of making up the difference. (see Bush's tax cuts)

burned any airplanes or equipment in need of repair. (See no bid Iraq contracts)

Should I go on?

[Ken Blanchard]

No, Dave. You have made my point pretty well.

[Kody]

Ted: Good thought and statement. The way I see it, no matter what you want to put the blame on, excessive spending or not, things have been way too good for way too long. It is tough times now, but it will be getting worse in the future. Hopefully we as an American people can learn from this ordeal and move forward with only bruises.

[larry kurtz]

Ted: North Dakota seems to defend the right of farm families to kill their children with agricultural equipment but denies the right of women to decide control over their own bodies.

http://www.grandforksherald.com/event/article/id/222950/group/homepage/

And I thought South Dakota was a failed red state.

[Dave]

That American was run way better than the US under BUSH? Thanks Ken, but I didn't see you making that point...